Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We have about $40k in student loans left at under 2%. Emotionally, I’d love to pay them off but it just makes no financial sense to do so.

but if you can pay them off, and you don't need the 40K in cash, making your monthly loan payments into some sort of investment account instead of the loan will make you more money in the long run

+1 this

People think they're being cutewith interest rate arbitrage or "putting money elsewhere" or what have you, but few actually take the time to sit down and do the simple compounding in excel. And even fewer know how to play the arbitrage game successfully. Just take 15 minutes and run a spreadsheet. Unless you're earning a very very safe 7%+ (and, the kicker, routinely using it to feed this loan + reinvest) you would be saving a lot more, not to mention your emotional state, by just throwing everything at it and being done with it.

Why do you have to be earning 7% more to make paying off a less than 2% loan ahead of schedule worthwhile? As long as you can beat 2% you get the extra liquidity and some gains. And with automatic investing it's really not hard to set up the alternative--you autopay an investment account. Done and on auto pilot. This worked great for me. 10 years after graduation my student loan was paid off AND i had a hefty investment account. I think the advice that "few really do this" was before automated investing.

Anonymous wrote:

Anonymous wrote:We have about $40k in student loans left at under 2%. Emotionally, I’d love to pay them off but it just makes no financial sense to do so.

but if you can pay them off, and you don't need the 40K in cash, making your monthly loan payments into some sort of investment account instead of the loan will make you more money in the long run

+1 this

People think they're being cutewith interest rate arbitrage or "putting money elsewhere" or what have you, but few actually take the time to sit down and do the simple compounding in excel. And even fewer know how to play the arbitrage game successfully. Just take 15 minutes and run a spreadsheet. Unless you're earning a very very safe 7%+ (and, the kicker, routinely using it to feed this loan + reinvest) you would be saving a lot more, not to mention your emotional state, by just throwing everything at it and being done with it.

Anonymous wrote:This is OP, thanks everyone for the replies. I have a little over $100k sitting in cash, not counting emergency fund, that could go to a down payment. I'd want as much house as we can afford but target is in the $800,000 range. (We also have equity in our current home, but plan to buy before selling.)

I think my real problem is that I haven't committed to long-term CDs -- in hindsight that cash could have been earning more than 2.6% all along, but it isn't because I wanted to keep it available.

If you're actively thinking about buying, I'd keep it liquid. You can always pay the loans off after you sell the old house if that's a priority (but honestly, it wouldn't be for me at such a low interest rate).

This is OP, thanks everyone for the replies. I have a little over $100k sitting in cash, not counting emergency fund, that could go to a down payment. I'd want as much house as we can afford but target is in the $800,000 range. (We also have equity in our current home, but plan to buy before selling.)

I think my real problem is that I haven't committed to long-term CDs -- in hindsight that cash could have been earning more than 2.6% all along, but it isn't because I wanted to keep it available.

I dragged out paying my student loans (2.6% interest) for as long as possible even though I had 10x the amount available to pay them off. Invested the money instead which earned far more. I scarcely noticed when they were fully paid off--it wasn't a big deal to me.

Anonymous wrote:I owe $17,000 at a fixed 2.625% (consolidated federal loan on the longest repayment plan). It's my only debt except for my mortgage. I have the cash to pay it off in full, but have been putting it off for years in case this is the year we buy a bigger house. This might be the year for that ... or not, again. The other possible home for the cash is a Roth IRA.

Would you pay off the loan? I want to, just to be done, but I feel like it's foolish to lose the liquidity.

If a measles 17k stands between you and a bigger home, I suspect your finances are a mess.

Anonymous wrote:We have about $40k in student loans left at under 2%. Emotionally, I’d love to pay them off but it just makes no financial sense to do so.

but if you can pay them off, and you don't need the 40K in cash, making your monthly loan payments into some sort of investment account instead of the loan will make you more money in the long run

I would go with the Roth, personally. I have a low interest school loan, too, and I've been tossing $100 at it for 15 years. As per the mantra of this forum, my priorities have been 1) safety net, 2) retirement (401k and Roth), 3) college funds for my kids (assuming it will earn more than I am losing with my loan). Down payment for a house was #4 until we bought the place.